Bucking The Bond Indexes

While the Guggenheim Total Return fund has been around less than four years, Guggenheim Investments has managed separate accounts for institutional investors much longer than that. In a recent report on the fund, Morningstar analyst Michael Herbst notes that while a representative account “has hit periodic rough patches in risk-averse markets” over the trailing decade ended May 2015, its annualized gain of 7% outpaced the Barclays U.S. Aggregate Bond Index by 2.4 percentage points.

Fund performance has been highly competitive, although shares have been slightly more volatile than the index. Between the fund’s inception in November 2011 and June 30 of this year, its annualized return was 6.96% for I class shares, while the return was 2.51% for the Barclays Aggregate. The latest fund fact sheet indicates the institutional share class has captured 147% of the index’s upside over the three years ending June 30, but just 36% of its downside.

Walsh emphasizes that while the fund’s managers are preparing for rising rates, its flexible positioning is designed to help it weather a broad spectrum of market behavior. Such flexibility will be critical going forward warned Guggenheim chairman of investments and global CIO Scott Minerd, who manages the fund with Walsh. In an article posted on the firm’s website in July, Minerd noted, “Today looks a lot like 2004 or 2005, when investors were blissfully ignorant of what awaited. It is still early, but I get increasingly concerned the longer I see undisciplined investors clamoring for bonds with suspect creditworthiness at ludicrously low yields. Higher rates, higher prices or both are on the horizon.”